Investing in gold has become significantly easier with the rise of gold-backed cryptocurrencies. These stablecoins have become the ideal solution for investors who are looking to make small investments in this scarce precious metal. As gold becomes harder to find, the demand for this asset continues to grow. Other reports share that shortages and difficulties bringing gold bullion to the market continue to be reasons for the rise in gold-backed cryptocurrencies.
Although the gold rush may be slowing down on the bullion side, it seems to be the opposite in the world of cryptocurrency.
What is a gold-backed stablecoin?
A gold-backed stablecoin is a digital asset that has its value tied back to gold itself. This means the price will only move in alignment with the price of gold. In many cases, one coin usually represents one ounce of gold. For further assurance, some cryptocurrencies even provide the purchaser with the serial number of the gold block, the weight or other documentation signifying the value of the token. Like any other cryptocurrency, you can purchase them on a standard exchange (or a precious-metal backed exchange like GoldExchange), hold them in your wallet and trade them at your convenience. The only difference, when crypto hits a period of volatile swings, gold-backed assets will remain virtually unaffected.
Most popular coin-backed cryptocurrency projects
Before selecting a gold-backed digital asset to invest in, it is important to do the necessary research ahead of time. While there are many great projects and trustworthy stablecoins, like any other market, some projects will not be worthwhile. Some of the most reputable projects to take advantage of gold’s all time highs include:
The same organization that released the USD backed cryptocurrency Tether, have since released a gold-backed cryptocurrency, Tether Gold (XAUt). Tether Gold has a market cap of over $26 million. The company states that each token is backed by one troy ounce of gold. The platform itself has KYC verification, guaranteeing purchasers can cash their tokens in for the equivalent amount of gold at any time. Unfortunately, the Tether website has set a minimum for the amount of tokens that can be purchased, making it less than ideal for investors with limited funds.
GoldCoin (GLC) is an ERC-20 stablecoin based on the Ethereum network. Each token is backed 1:1 by gold holdings and can be purchased in any amount at any time.
The financial institution PAXOS, also offers a gold-backed stablecoin Pax Gold (PAXG). The value of PAXG is tied to one troy ounce of a gold bar stored in a vault in the United States. The minimum investment in PAXG is 0.01 troy ounce of gold, which can be done directly on the creator’s website or through a variety of other cryptocurrency exchanges.
Determining a gold-backed cryptocurrency to invest in
A gold-backed stablecoin is a great addition to any investor’s portfolio and is believed to be among the next generation of cryptocurrency assets targeted at slow and steady growth. To determine which cryptocurrency will be the best investment, it is important to do your own research to verify that the digital assets are actually backed by gold. The number of tokens in circulation is equivalent to the amount the organization is holding in storage. This information can typically be found on the company’s website or published whitepaper. News sites and blog posts from reputable sites can also provide insights into the validity of the project.